Honestly it depends on your TV. If the native resolution of the TV is 720p then that will be better to play at - but if the native resolution is 1080i then that will be better.
Also "some" people notice a slight flickering on 1080i sets which may be iritating - but if you don't notice it then you're good to go.
There is no definite answer to this question - it's kind of like asking "What's better choclate or vanilla?" - It's truly a matter of preference - so experiment and see which you like better. The actual console will run either resolution perfectly smooth and nearly all of the games now support both of those resolutions natively.
Yeh it is completely down to your tv and your personal prefernce I personaly have mine at 720p as I feel it displays the image slightly brighter but to be honest there is barely any differnce IMO.
I don't want to be a a jack@$$ or anything, but you could have just searched the forums for this topic. Due to the fact that every week atleast 2 of them are made. There is a difference between the two. 720p is displayed as a resolution of 1280x720 and is progressive scan. Progressive scan means that all of the lines for the picture are instantly drawn up and appear on your tv. 1080i is displayed as a resolution of 1920x1080 and is interlaced, that is what the i on the end stands for. Interlaced means that first the vertical lines are drawn up and then the horizontal or that first the right lines are drawn up and then the left. Not sure at the moment which one of the two it is. So with 1080i the whole image doesn't get drawn up at the same time and could create artifacts on your tv, which definately isn't good. This part does not depend on the type of tv you have. 720p is always better for gaming becase a progressive image always has 60 frames per second. 1080i on the other hand only gets 30 frames per second therefore it does not run as smoothly. 1080i is better for movies and still images such as a picture slideshow. Now to the tvs. Pretty much every HDTV that is LCD supports 720p and most of them have 720p as there native resolution. HDTV's that are CRT do not support 720p and only support 1080i. Not sure if all HD CRT tvs are like that, but the majority are. So overall to answer your question, 720p is better for gaming because it is progressive scan, most HD LCD tvs use that as their native resolution, and the XBOX 360's native resolution is 720p.
One more thing on a tv smaller than 50in you cannot or barely can notice the difference between the 1280x720 resolution and the 1920x1080 resolution. Don't be fooled just because 1080i has the bigger resolution, that is a common mistake.
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